[OUTLOOK]Suits could bring ‘shark’ lawyersAmerican society has popular caricatures that portray lawyers with shark faces or jokes that go: “Even sharks do not prey on lawyers because of professional courtesy.” This is because many innocent people have successively fallen victim to some bad lawyers hunting for lawsuits. The media has also criticized them for paralyzing the legal system.
The fundamental cause for the proliferation of shark lawyers is the class action lawsuit system. Preying particularly on blue chip companies with sufficient capability to pay indemnities, these lawyers file class action lawsuits on the ground that a certain product has a defect or the company made false statements. Then, the sued businesses will be trapped.
Because management could be paralyzed by the lawsuit, and the companies may have to pay an astronomical amount in damages if they lose the suit, they agree at a reasonable level when lawyers offer a negotiation proposal, rather than facing a decade-long fight over a lawsuit.
Among world-class businesses, there are few that have not had bitter experiences with class action lawsuits.
Coca-Cola, an exemplary case for shareholder-centered management, was harassed by a class action lawsuit on the ground that its stock forecasts were too optimistic.
Wal-Mart, which had exclusively headed the list of top 500 global businesses, was sued on the grounds that it discriminated against female employees because of their gender; and McDonald’s on the grounds that it was responsible for obesity.
Companies like Dow Corning were nearly driven into bankruptcy. Although Harvard Medical School and the National Academy of Sciences submitted findings that it was hard to hold the company responsible, Dow Corning could not win the suit and agreed to pay $3.2 billion in damages.
On the other hand, shareholders and consumers got meager benefits from class action lawsuits. Toshiba, a Japanese computer maker, was sued on grounds that some lap top computer parts had defects and agreed to pay $2.1 billion in compensation. But consumers received discount coupons for a new product at the most, whereas lawyers pocketed as much as $150 million in fees.
This class action lawsuit system ―which the White House blames for wasting $230 billion annually in the United States, the originating country of the lawsuit ―will be introduced to our society this year, although it will be limited to the area of securities.
Some say that the lawsuit system will cause no problems if businesses have transparent management, but this is a naive idea: Overlooking the fact that in American society, the system is pointed out as a disease that can ruin the country, they believe that lawyers are guardians of conscience.
When the class action lawsuit system is introduced in the area of securities, funds that should be used for job creation and consumers through investment and product development, are highly likely to be diverted to fatten evil lawyers.
The spirit of entrepreneurship will die away. Shareholders will lose because share prices will fall due to the lawsuits and see another loss because business value will drop because of payments.
Fund managers working in Korea as well as Wall Street also hate the class action lawsuit system because the system threatens shareholders’ interests in many ways rather than protect them.
For these reasons, the business community opposed the introduction of the system from the beginning. Business people pleaded that although they would be punished for their behavior that maliciously brings loss to investors like false announcements even after the law passes, they should be saved from being sued for window dressing in accounting that was committed in the past.
Their intention was to ask for some more time: They said that although window dressing was wrong, the recession made it hard to produce profit properly and solve the problem of accounting irregularities of the past.
Fortunately, the government understood the seriousness of the situation. After consulting with the parties, the government came up with a device to postpone the application of the lawsuit system to accounting irregularities of the past two years. But this proposal was nullified because of opposition from some governing party lawmakers.
Business people are said to live with charcoal in their hearts, and those who could not solve the problem of accounting irregularities yet are likely to live with one more lump of charcoal added to their hearts from now on.
When the legal market is open to foreigners sooner or later, I am afraid Korean society may turn into a golden fishing ground for shark lawyers. Young lawyers who can’t get a job even after completing training at the Judicial Research and Training Center will try to be ambulance chasers, lawyers who persuade accident victims to sue for damages.
I am worried if they might rush to become lawyers specializing in class action lawsuits, who are worse than ambulance chasers.
In a situation where legislation on lawsuit abuse prevention is urgent, a bill that expands the scope of class action lawsuit to all areas, including consumers and environment, was presented at the National Assembly.
This is probably because of the anti-business sentiment that regards businesses as an immoral group but lawyers as moral.
But if businesses are harassed by class action lawsuits, Korea will end up becoming a country where they cannot do business.
I earnestly hope that politicians will carry out their duty of legislation in the direction that benefits the national economy by taking into consideration the experiences of the United States with class action lawsuits.
* The writer is the chairman of the Korea Chamber of Commerce and Industry and the International Chamber of Commerce. Translation by the JoongAng Daily staff.
by Park Yong-sung